Young adulthood is fraught with peril. You’re young, you’re on your own, and you only know about 10 percent of what you ought to know about being a responsible, functioning adult. You’re in that dangerous emotional space between being a child who isn’t responsible for anything and an adult who’s responsible for everything. It’s a difficult transition, to say the least.
Money will always be a tricky subject, but it gets trickier when it involves more than one person. That’s why money has a tendency to become an issue in otherwise healthy relationships.
It also makes cohabitation a bit complicated. Who pays for what? How do you split bills? What happens when someone can’t pay their share?
A lot of people make the mistake of heading into roommate situations – either as a couple, or friends, or complete strangers – without first creating a plan for managing shared expenses. Everyone is different, so there’s no one plan that will work for everyone, but here are a few variations. There’s a good chance one of them might work for your situation.
1. Bill Masters
Living in a house with four roommates and managing the bills can sound complicated, but this set-up is pretty simple. Each person should be in charge of managing certain bills. This means whenever a bill is due, that person is responsible for collecting everyone’s share. If you buy your own food and split the rest of the bills, you can usually remain drama-free in money management.
2. Shared account
One way to manage shared expenses that makes a bit more sense if you’re living with your significant other, is to create a joint savings, checking, or credit card account. You each pay equally into the account, which is only used for shared, household-specific expenses. HomeTown Bank suggests the Goal Setter Savings account for couples who are looking to direct their savings towards a specific goal.
Of course, creating a shared account can be potentially dangerous if one or both of you abuse it. It can also turn pretty messy if the relationship doesn’t work out, so tread carefully when opening shared accounts.
3. Track and total
Some people prefer operating autonomously and then hashing out their expenses at the end of the month. In this method, you buy groceries and pay bills independently, then come together at the end of the month with your pile of receipts to sort out who paid what and how much. You can then either pay out the difference to whoever paid more, or you can factor the difference into your rent or mortgage payment (if you paid less in bills you’d pay more in rent).
This keeps your money separate, but requires that you keep records and set aside time to discuss the month’s spending. The easiest way to keep track? HomeTown Bank’s account features such as e-statements and OurCashFlow are helpful tools to review where your money is going each month.
4. Half of everything, all the time
If you don’t like to do any sort of math that isn’t dividing something by two, then you can simply split every bill and expense as soon as it arrives. That means writing a check (or making a transfer) every time one of you pays a common expense, including irregular expenses, like groceries. This is more work in the short-term, but saves you from having to total up expenses at the end of the month.
5. Don’t keep score
If you want a truly hands-off approach, you can look at the average amount on certain bills, assign out those bills as evenly as possible, and then stop paying attention. You won’t pay exactly the same amount every month, especially as certain expenses rise and fall from month-to-month. Instead, you’ll be paying roughly the same amount.
This requires the least amount of work, but the highest amount of trust and understanding. You need to feel okay about the fact that you’ll be paying marginally more on certain months. Because of that, this only works for certain personality types, and preferably for committed partners with clear financial goals.
Make sure you pick a plan that fits your style. You can use one of the five listed here, or create something totally new. The important thing is that everyone agrees to the system and feels comfortable. Like all important money conversations, this isn’t one you can’t afford to skip.